Since the start of the telecommunications industry, we have seen loopholes exploited and fraudulent schemes hatched. We have seen international fraud, phishing scams, traffic pumping, short duration mixing, port pounding, call transfer fraud, dip pumping, and dozens of other shady activities. Unfortunately, we have come to accept that these activities are par for the course. New schemes will always be popping-up and providers have to learn how to minimize them, notice we didn’t say stop them.
Over the past few months, we’ve seen a spike in phishing scams. This is a scam where a wholesale VoIP number is purchased with the intentions of calling members of a credit union or bank. These automated calls alert members of an account breach and ask them to type in their account number to resolve the issue. When the account number is entered, DTMF (Dual Tone Multi Frequency) is recorded to determine the account number. Once this happens, personal information is now in the wrong hands. At VoIP Innovations we take this sort of scam seriously and have suspended accounts for using this practice. Adjusting our policies, procedures, and involving the correct authorities have made a big difference with the frequency of these events.
Even more recently, we've started noticing a different trend called traffic pumping. This occurs when calling long distance because those calls are generally handled by a number of telephone companies. Your local carrier delivers the call from your phone to a long distance company, the long distance company carries the call most of the way to its destination, and then the call is handed off to the local carrier that serves the party you’re calling. Under today’s rules, the long distance company pays a fee, called an “access charge,” to the local carrier that delivers the call to the called party.
Traffic pumping, also referred to as “access stimulation,” occurs when a local carrier with high access charge rate enters into an arrangement with another company with high call volume operations, such as chat lines, adult entertainment calls, “free” conference calls, dead air calls, or broadcasting entertainment. The arrangement inflates or stimulates the number of calls into the local carrier’s service area, and the local carrier then shares a portion of its increased access revenues with the “free” service provider, or provides some other benefit to that company. The local company’s profits from such an arrangement are typically so great that its charges become unreasonable and unlawful under FCC regulations.
Access stimulation is harmful to consumers and competition in a number of ways. First, it distorts investment incentives. As a result of an access stimulation scheme, the long distance companies are forced to recover the inflated access costs from all of their customers, even though many of them do not use the services that caused the stimulation in demand. It also harms competition by giving companies that offer, for instance, free conference calling services a competitive advantage against companies that charge their customers for the service.
There’s a pretty interesting blog written by TransNexus, called the Face of Traffic Pumping. In this blog they talk about an individual who offers free international radio broadcast, over the phone, to immigrant communities (cab drivers). He obtained a number in a rural area, with a carrier willing to share their access charges. To demonstrate how impactful traffic pumping can be, we copied a section from their blog illustrating the potential financial windfall.
“Suppose the average phone call for a cabbie or small shop owner listening to the radio all day is eight hours. Next, suppose you have just 1,000 of these dedicated listeners and the terminating access fee is $0.05 per minute. The total arbitrage revenue generated is $24,000 a day or $720,000 a month. If the rural CLEC shares 40% of this revenue, the traffic pumper collects a nice $288,000 per month for himself.”
So the question becomes, how does a provider stop traffic pumping? The answer is, they don’t. The only real course of action is to minimize it by educating customers, adjusting policies and procedures, and using the proper authoritative channels. The Federal Communications Commission (FCC) regularly receives complaints from consumers on a wide variety of issues. Consumers are encouraged to always try to resolve the problem first with the company whose products, services or billing are the issue. However, if that does not succeed, they may file a complaint with the commission.
There are two types of official complaints – informal and formal. The first step in the complaint process is filing an “informal complaint.” Even though the process is called “informal”, the commission takes these complaints seriously and they receive substantial attention and consideration. The informal complaint process requires no complicated legal procedures, has no filing charge, and does not require the complaining party to appear before the FCC. Consumers not satisfied with the response to an informal complaint can file a formal complaint. A formal complaint must be filed within six months of the date of the FCC’s response to your informal complaint. The current fee for filing a formal complaint is $200. Formal complaint proceedings are similar to court proceedings. Each party must comply with specific procedural rules, appear before the FCC and file documents that address legal issues. Parties filing formal complaints usually are represented by lawyers or experts in communications law and the FCC’s procedural rules. Complete information on how to file formal complaints are available through the Enforcement Bureau.